Your Financial Plan

I am 32. I work in the private sector and my wife (32) too is employed. We will be welcoming our child soon. I wish to hold the 1 BHK while buying new property. I may avail loan for ₹60 lakh.

Balaji (name changed on request)

It is heartening to note that you are starting to save even before the arrival of your first child. You will reap the benefits by the time you turn 45, when family expenses increase. Stay invested in mutual funds and rebalance it over the years to meet your child’s education and marriage needs. Today’s education costs of ₹25 lakh will be ₹90 lakh after 19 years and marriage expenses will be ₹1.77 crore after 24 years if inflated at 7 per cent.

You need a retirement corpus of ₹8.7 crore and it should earn 1 per cent over and above the inflation to meet your monthly needs till you turn 85. If the EPF balance grows at 8.6 per cent, at retirement it will be ₹55 lakh. Invest ₹30,200 a month (inclusive of your EPF contribution) to meet the shortfall.

Use the savings account balance for child expenses. Earmark ₹21,000 from SIP for retirement, the rest can be accumulated towards the down payment while buying property. The current mutual fund portfolio is completely skewed towards mid- and small-caps. Restrict the exposure to less than 60 per cent of savings.

The writer is a SEBI registered investment advisor and founder, myassetsconsolidation.com

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